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Q3 2015 Report & Conference Call

Discussion in 'TSLA Investor Discussions' started by anticitizen13.7, Nov 1, 2015.

  1. anticitizen13.7

    anticitizen13.7 Enemy of the Status Quo

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    Tesla will release its 3rd Quarter results on Tuesday, 3 November 2015. I feel that this report and call will be more important than usual, because the company will be reporting guidance after a major product launch (Model X).

    In particular, I am looking for Tesla to answer serious questions about the Model X launch and ramp.

    After a month, there seem to be only a handful of Founders Series deliveries, and questions continue to fester regarding specifications. For example, photos and videos taken on launch night showed Model X vehicles with 72-amp chargers. More recently, a customer was told that Model X would only have a 48-amp charger (http://www.teslamotorsclub.com/showthread.php/56581-Update-Model-X-has-a-single-charger-but-only-48A-capable). With customers largely in the dark about critical specifications and actual delivery dates, I feel that Tesla needs to issue new guidance on Model X deliveries for this year. As a shareholder, I am not happy with the way that this launch has been handled. Given all of the experience gained with Model S, why is the company fumbling now? I want to know what they intend to do about this.

    I am hopeful that increased interest in Model S, due to the X launch (people can get an S fairly quickly, if the event sparked interest in a Tesla) and publicity surrounding Autopilot, can cover any gap caused by any Model X production issues. Tesla had previously stated in quarterly reports that delays in Model X could affect deliveries and therefore reduce revenues by a noticeable amount (a couple hundred cars/week translates into 10s of millions of dollars in revenue).

    Any news on Tesla Energy, Gigafactory, and Model 3 would be welcome.
     
  2. tftf

    tftf Member

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    #2 tftf, Nov 1, 2015
    Last edited: Nov 1, 2015
    This has been Tesla's strategy in the past. Whenever there were execution problems, missed numbers or delays, Tesla preferred talking about lofty future plans (usually many years out, so nobody asked about nasty details how these goals can be achieved/financed...).

    This continued in recent weeks (a car factory in China, a battery factory in India, a Model Y variant coming soon after the Model 3...) even in view of severe Model X "launch" problems and open questions.

    One day, even the most bullish sell-side analysts will wake up and see the gap between future announcements and reality widening so much that they won't believe in new distant promises without getting answers and hard numbers on current issues first.

    Nov 3, 2015 could be the first day of reckoning.

    The most recent SCTY conference call/quarterly result has shown how hard a stock can fall even with the Elon Musk cult factor attached to it.
     
  3. Lessmog

    Lessmog Member

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    I agree with anti, those issues are very important, especially at this juncture. Particularly the status and progress re: X but also those developments that will follow (hopefully) somewhat later. Right now we need to hear more good stuff about the X roll out.

    Biting my finger nails here; were I younger and more nimble my toes would soon be in jeopardy. :rolleyes:
     
  4. brianman

    brianman Burrito Founder

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    I worry this report means 170-180.
     
  5. tentonine

    tentonine Member

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    Likewise. I have been long TSLA for a long time and have been remained reasonably confident until it became clear that Model X production had been screwed up, particularly when we started hearing that they won't even be able to deliver all of the sigs this year. They might still make 50k guidance, but I don't know if that will be enough, given continued Model X uncertainty.

    I'm probably going to cash out some of my long positions ahead of ER and buy protective puts on the rest.
     
  6. ItsNotAboutTheMoney

    ItsNotAboutTheMoney Active Member

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    Depends on the number of longs who sell off. Could go lower than that. The X ramp is a matter of survival for the company. Tesla needs to ramp production of the X, and then it has to get margin. That will slow down the cash burn. Then eyes can turn to Gigafactory Part 1 to see how well the battery production ramps for the storage division.

    - - - Updated - - -

    And there's an example of how the shares could tank after the ER.
     
  7. Svetlin

    Svetlin Member

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    Why do you think that? Let's say it's delayed by another 6 months. Tesla can either raise more capital, or slow down investments in superchargers and the gigafactory. Yes, it will push out Model 3, and analysts will adjust their models and the stock price will drop. But the company will survive just fine.
     
  8. anticitizen13.7

    anticitizen13.7 Enemy of the Status Quo

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    Most of this has been talked about in the past already: Additional car factories (full facilities, not just assembly for partially completed cars), one in China and one in the European Union, are expected in the 2020's, or whenever the sales volumes can support them. Same with the "Model Y". Compact crossovers are big sellers globally, so it was no surprise that the company hinted at plans to build a smaller crossover based on Model 3. I don't see these as much of a distraction, because Tesla officials have said these things for years.

    A combination of the 10-Q statement and news on capital raises gives the details.

    For the first 6 months of 2015, Tesla spent a net of around 755M $US (looking at their total intake vs. total outlays), much of this in R&D, equipment, and construction (new paint shop, assembly line upgrades, Gigafactory). Coincidentally, the company raised about $740M in a stock offering this past summer. Panasonic committed to investment of around $500M in automotive products for 2015, much of which will go towards the Gigafactory.

    My perspective is that most of Tesla's cash burn is driven by R&D and purchases of property & equipment. These are items that have potential future payoff, which is why investors continue to buy shares and debt from the company.

    The situation would be much different if the cash burn were driven by losses from operations (things like losing money on actual vehicles sold and health care & pension payouts exceeding revenues). If we put aside R&D and plant expansion for a moment and consider Model S production alone, it's clear that Model S is a money maker. It's the example case that people look at -- the hint at what Tesla could become. The question for now is whether Model X will be a money maker, and how much Tesla Energy will contribute to the bottom line.

    I think this underscores a level of risk that may not be for everyone.

    In my case, I find the level of risk perfectly acceptable and even amusing. Then again, you are talking to someone who accelerated buying of shares after Lehman Brothers collapsed. I bought piles and piles of stock all the way to the rock bottom of early 2009.

    - - - Updated - - -

    Model X is in a way the answer to a critical question: is Tesla capable of being more than a "One Hit Wonder"? We know from Model S that Tesla's operations side is capable of operating at a healthy profit for that one product. Can they get to the next level by doubling production with the addition of a new product? How well will the company handle the complications of an expanded supply chain and production line? If Tesla does pull through and ramp up Model S and X to combined 1,600-1,800 units/week, and continues to be exceptionally profitable on the operations side, the answer will be unequivocally yes. However, a problematic ramp and/or reduced gross margins would call this into question. This does impact a company's ability to raise capital. People might not be willing to buy more share offerings at a high price, and lenders will demand higher interest rates on notes.

    This is why I want more info from Tesla on the Model X ramp. It goes directly to the future ease or difficulty of getting future investment for rapid expansion.
     
  9. FredTMC

    FredTMC Model S VIN #4925

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    All will be great with TSLA if they reaffirm q4 guidance. I think they will. Keep in mind that tesla said the MX ramp starts late in Q4. Everyone seems to think that the ramp should've happened right after the MX launch event but that was not what they said on the last earnings call. Ramp starts in late Q4... It's right in the ER from last quarter (dated August 5th).
     
  10. anticitizen13.7

    anticitizen13.7 Enemy of the Status Quo

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    If there was some kind of discernible ramp (for example, 5-6 units per week to start, and increasing from there), I might be less concerned. What I've seen in the Model X forum appears to be no ramp at all for the past month, unless 1 blue Model X to the nVidia CEO counts as a ramp.

    Now, it's possible that Founders Series owners are sworn to secrecy, but I'd like to hear from Tesla: where are the cars?
     
  11. FredTMC

    FredTMC Model S VIN #4925

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    We have evidence of MX I production. Apparently DSs aren't supposed to discuss it though. See comments from 7Racer.
    he is vin 100ish. His car was headed to paint shop and delivery was expected in a few weeks. Mid nov
     
  12. tentonine

    tentonine Member

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    #12 tentonine, Nov 1, 2015
    Last edited: Nov 1, 2015
    The problem is that a number of sig X orders are apparently not going to be delivered until January, indicating a protracted slow ramp. It is therefore looking increasingly likely that Tesla may not be cash flow positive next quarter after all (and I was slightly alarmed recently to hear Elon say that cash flow positive was now the goal for 'next year', rather than 'next quarter'; the comment by itself is not really evidence of anything, but doesn't sound good in conjunction with comments in the Model X forums). Furthermore, 2016 guidance may be affected, although this probably won't be formalized until Q4 earnings.

    I think that there is room for a lot of potential good news in the conference call:
    - Even if they only come reasonably close to meeting guidance, it shows that there is still growing demand for the Model S.
    - In particular, I expect favorable comments on demand in Europe, following on from a comment from JB Straubel in his talk in Reno recently.
    - News about the impact of the referral program will also be interesting.
    - Autopilot's final release could have further increased demand and they might mention that.
    - Now that Tesla Energy products are going to be shipping this quarter, there may be preliminary indications of the percentage of conversions from reservations to firm orders in select markets. We already know that the number of no-commitment no-deposit reservations is vast, so any good news on a high percentage of firm orders could help a lot. On the other hand, I have no way of knowing if the percentage of firm orders is actually high or low!
    - Adam Jonas could indulge in some more Tesla Mobility speculation, which might be a little more concrete this time because of GM's recent announcement of a move in that direction.
    - More details on future factories could be provided and also perhaps more news on gigafactory expansion - it's always possible that they could be further ahead of schedule or planning to ramp even quicker to meet Tesla Energy demand. I would also appreciate more details on the final capacity of the gigafactory - they have mentioned before that it is now likely to be 50% greater than initially stated, but I don't recall seeing a timeline for how long it will take to reach the new maximum capacity.

    However, even if they meet 50k guidance with Model S, I just don't think any of this will prevent a share price drop for now in light of the slow X ramp, along with potential cash flow and 2016 delivery implications. That's why I'm feeling negative about the ER overall. Although the share price has already dropped a lot, I don't think most of the analyst reports have adequately reflected quite how slowly the ramp is going at the moment (although I admit that they are overly-pessimistic in other ways, like claiming that the ASP is too high, when we know that a cheaper model will be introduced next year).
     
  13. FredTMC

    FredTMC Model S VIN #4925

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    I was estimating 500 MX thru year end and still hitting 50k. I think this is why tesla guidance was lowered to a range of 50-55k.
    If ramp was on plan then 55k was doable. if not then it's a few thousand cars lower on reduced MX production
     
  14. ItsNotAboutTheMoney

    ItsNotAboutTheMoney Active Member

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    You're begging the question of raising more capital.
     
  15. Phoenixhawk101

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    I think that the signs are all there. Tesla was not ready to release the MX into full production, but they were pretty much out of time. They needed to keep at least this most recent release date even if it was only a way to appease others for them to gain a month or two to get production up to speed. I do think it will happen, but they are just a little behind schedule (nothing new for Tesla). I don't see this being a problem for the company long term but I do expect Wall Street to be pretty unforgiving in the short term. I personally have a bunch of cash stored up to buy in after ER. As I don't expect anything Tesla says being good enough for Wall Street.

    Slow MX ramp up, continued "Cash burn" for R&D, looking to really hit their stride Q2 of 2016, with images of M3 coming around that time too. I bet the price will bump right after the Q1 ER but it will be low until then.
     
  16. Svetlin

    Svetlin Member

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    I was just replying to the notion that "survival of the company" is at stake for the Model X ramp. Raising more capital would leave a negative perception that Tesla can't get their act together, and might make for a tougher time raising money next time, but it won't spell the end of Tesla.
     
  17. Benz

    Benz Active Member

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    I think that's correct.

    It will be very interesting to learn what they will mention in the Q3 Shareholder Letter about the 2015 annual guidance of 50,000 - 55,000?

    Will they reduce it to a level of below 50,000 or not, that's the main question, I think.
     
  18. sub

    sub Member

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    I don't think the January delivery rumor was ever confirmed with enough evidence to trust it. I can't find the thread, but last I checked in on that discussion there was still only two posters claiming this and they were both new members making their first post. If your going to take that as evidence I have a bridge in Brooklyn I can sell you cheap.
     
  19. tentonine

    tentonine Member

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    I saw at least 3, including one who wasn't new.
     
  20. sub

    sub Member

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    feel free to point me in the direction of the one that wasn't new? The other two I've completely disregarded, came off as an attempt to manipulate the stock.
     

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